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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Koss Corporation | NASDAQ:KOSS | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.18 | -5.33% | 3.20 | 3.23 | 3.53 | 3.5999 | 3.21 | 3.38 | 306,494 | 01:00:00 |
DELAWARE
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39-1168275
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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4129 North Port Washington Avenue, Milwaukee, Wisconsin
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53212
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
þ
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(Do not check if a smaller reporting company)
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Item 1.
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Financial Statements
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Three Months Ended
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Six Months Ended
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||||||||||||
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December 31
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December 31
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2016
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2015
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2016
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2015
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||||||||
Net sales
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$
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6,687,797
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$
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7,229,341
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$
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13,036,503
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$
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12,760,603
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Cost of goods sold
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4,481,086
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4,566,518
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8,887,533
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8,451,445
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Gross profit
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2,206,711
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2,662,823
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4,148,970
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4,309,158
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Selling, general and administrative expenses
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1,987,391
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1,989,114
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3,763,162
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3,754,860
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Unauthorized transaction related (recoveries) costs,
net |
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(3,404
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)
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37,475
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34,096
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74,950
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Interest expense
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118
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757
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964
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6,075
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Income before income tax provision
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222,606
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635,477
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350,748
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473,273
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Income tax provision
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82,494
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248,845
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126,425
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187,445
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Net income
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$
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140,112
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$
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386,632
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$
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224,323
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$
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285,828
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Income per common share:
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Basic
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$
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0.02
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$
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0.05
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$
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0.03
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$
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0.04
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Diluted
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$
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0.02
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$
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0.05
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$
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0.03
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$
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0.04
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(Unaudited)
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December 31, 2016
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June 30, 2016
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||||
ASSETS
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Current assets:
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Cash and cash equivalents
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$
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807,909
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$
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735,393
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Accounts receivable, less allowance for doubtful accounts of $54,237 and
$55,175, respectively |
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3,678,523
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3,530,854
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Inventories
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7,980,299
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8,595,485
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Prepaid expenses and other current assets
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407,367
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281,099
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Income taxes receivable
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533,134
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583,507
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Total current assets
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13,407,232
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13,726,338
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Equipment and leasehold improvements, net
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1,595,033
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1,514,472
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Other assets:
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Deferred income taxes
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3,136,503
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3,212,556
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Cash surrender value of life insurance
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5,979,416
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5,667,105
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Total other assets
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9,115,919
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8,879,661
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Total assets
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$
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24,118,184
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$
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24,120,471
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
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Accounts payable
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$
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1,998,121
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$
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1,966,656
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Accrued liabilities
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1,168,773
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1,601,652
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Total current liabilities
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3,166,894
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3,568,308
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Long-term liabilities:
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Deferred compensation
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2,190,268
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2,187,714
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Other liabilities
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173,460
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178,255
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Total long-term liabilities
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2,363,728
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2,365,969
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Total liabilities
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5,530,622
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5,934,277
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Stockholders' equity:
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Common stock, $0.005 par value, authorized 20,000,000 shares; issued
and outstanding 7,382,706 shares |
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36,914
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36,914
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Paid in capital
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5,248,001
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5,070,956
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Retained earnings
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13,302,647
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13,078,324
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Total stockholders' equity
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18,587,562
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18,186,194
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Total liabilities and stockholders' equity
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$
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24,118,184
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$
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24,120,471
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Six Months Ended
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||||||
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December 31
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||||||
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2016
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2015
|
||||
Operating activities:
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Net income
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$
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224,323
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$
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285,828
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Adjustments to reconcile net income to net cash provided by
operating activities: |
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||||
Recovery of doubtful accounts
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(1,811
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)
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(14,179
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)
|
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Loss on disposal of equipment and leasehold improvements
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—
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4,987
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Depreciation of equipment and leasehold improvements
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254,820
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251,936
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Stock-based compensation expense
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177,045
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245,408
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Deferred income taxes
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|
76,053
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|
|
46,969
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Change in cash surrender value of life insurance
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(180,542
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)
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(132,293
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)
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Change in deferred compensation accrual
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77,554
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47,537
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Deferred compensation paid
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(75,000
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)
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(75,000
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)
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Net changes in operating assets and liabilities (see note 9)
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(12,776
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)
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858,995
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Cash provided by operating activities
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539,666
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1,520,188
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||||
Investing activities:
|
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Life insurance premiums paid
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(131,769
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)
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(129,381
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)
|
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Purchase of equipment and leasehold improvements
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(335,381
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)
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(259,662
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)
|
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Cash (used in) investing activities
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(467,150
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)
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(389,043
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)
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||
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|
||||
Net increase in cash and cash equivalents
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72,516
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1,131,145
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Cash and cash equivalents at beginning of period
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735,393
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1,000,266
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||
Cash and cash equivalents at end of period
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$
|
807,909
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$
|
2,131,411
|
|
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Three Months Ended
|
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Six Months Ended
|
||||||||||||
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December 31
|
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December 31
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Legal fees incurred
|
|
$
|
—
|
|
|
$
|
37,500
|
|
|
$
|
37,500
|
|
|
$
|
75,000
|
|
Proceeds from asset forfeitures
|
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(3,404
|
)
|
|
(25
|
)
|
|
(3,404
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)
|
|
(50
|
)
|
||||
Unauthorized transaction related (recoveries) costs,
net |
|
$
|
(3,404
|
)
|
|
$
|
37,475
|
|
|
$
|
34,096
|
|
|
$
|
74,950
|
|
|
|
December 31, 2016
|
|
June 30, 2016
|
||||
Raw materials
|
|
$
|
2,893,371
|
|
|
$
|
3,466,907
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Work-in process
|
|
6,522
|
|
|
—
|
|
||
Finished goods
|
|
7,556,560
|
|
|
7,570,026
|
|
||
|
|
10,456,453
|
|
|
11,036,933
|
|
||
Allowance for obsolete inventory
|
|
(2,476,154
|
)
|
|
(2,441,448
|
)
|
||
Total inventories
|
|
$
|
7,980,299
|
|
|
$
|
8,595,485
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December 31, 2016
|
|
June 30, 2016
|
||||
Cooperative advertising and promotion allowances
|
|
$
|
335,129
|
|
|
$
|
479,645
|
|
Product warranty obligations
|
|
254,807
|
|
|
305,275
|
|
||
Customer credit balances
|
|
19,084
|
|
|
47,753
|
|
||
Current deferred compensation
|
|
150,000
|
|
|
150,000
|
|
||
Accrued returns
|
|
90,444
|
|
|
140,918
|
|
||
Interest
|
|
1,417
|
|
|
—
|
|
||
Employee benefits
|
|
75,581
|
|
|
83,113
|
|
||
Legal and professional fees
|
|
92,500
|
|
|
127,329
|
|
||
Management bonuses and profit-sharing
|
|
67,581
|
|
|
147,450
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|
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Sales commissions and bonuses
|
|
45,567
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|
|
70,050
|
|
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Other
|
|
36,663
|
|
|
50,119
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|
||
Total accrued liabilities
|
|
$
|
1,168,773
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|
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$
|
1,601,652
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Six Months Ended
|
||||||
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December 31
|
||||||
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2016
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|
2015
|
||||
Accounts receivable
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|
$
|
(145,858
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)
|
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$
|
324,032
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Inventories
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615,186
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|
|
142,187
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|
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Income taxes receivable
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|
50,373
|
|
|
140,476
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|
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Prepaid expenses and other current assets
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(126,268
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)
|
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(40,294
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)
|
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Accounts payable
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31,465
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|
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(545,618
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)
|
||
Accrued liabilities
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(432,879
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)
|
|
865,018
|
|
||
Other liabilities
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(4,795
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)
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(26,806
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)
|
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Net change
|
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$
|
(12,776
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)
|
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$
|
858,995
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|
||||
Net cash paid during the period for:
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|
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|
|
|
||
Income taxes
|
|
$
|
810
|
|
|
$
|
800
|
|
Interest
|
|
$
|
964
|
|
|
$
|
6,075
|
|
|
|
Six Months Ended
|
||||||
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December 31
|
||||||
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2016
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|
2015
|
||||
Net income
|
|
$
|
224,323
|
|
|
$
|
285,828
|
|
Stock-based compensation expense
|
|
177,045
|
|
|
245,408
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|
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Increase in stockholders' equity
|
|
$
|
401,368
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$
|
531,236
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•
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On December 17, 2010, the Company filed an action against Park Bank in Circuit Court of Milwaukee County, Wisconsin alleging a claim of breach of the Uniform Fiduciaries Act relating to the unauthorized transactions, as previously reported. In 2015, Park Bank filed third party claims based on contribution and subrogation against Grant Thornton LLP and Michael Koss. The Court granted motions to dismiss the contribution claims against Grant Thornton LLP and Michael Koss, but determined that it was premature to decide the subrogation claims at this stage of the proceedings. On or around March 11, 2016, the Court entered an order granting Park Bank's motion for summary judgment that dismissed the case. On March 22, 2016, the Company filed a Notice of Appeal that appeals the order granting Park Bank's motion for summary judgment and the Court's denial of the motion to dismiss the subrogation claims. The case remains on appeal.
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Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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•
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Net sales for the quarter ended
December 31, 2016
, decreased
7.5%
to
$6,687,797
, compared to the same quarter last year. This decrease was primarily caused by a decline in sales to distributors in Scandinavia and Asia. For the
six months ended December 31, 2016
, net sales were
$13,036,503
compared to
$12,760,603
for the same period last year for an increase of
2.2%
. This sales increase was primarily due to higher sales to an original equipment manufacturer ("OEM") in Asia which was partially offset by a decline in sales to distributors in Scandinavia and Asia.
|
•
|
Gross profit as a percent of sales decreased for the
three and six months ended December 31, 2016
compared to the same periods last year. These fluctuations were primarily due to the change in the mix of business by product, customer and sales channels.
|
•
|
Selling, general and administrative expenses for the
three and six months ended December 31, 2016
were consistent with the same periods in the prior year.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
December 31
|
|
December 31
|
||||||||||||
Financial Performance Summary
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net sales
|
|
$
|
6,687,797
|
|
|
$
|
7,229,341
|
|
|
$
|
13,036,503
|
|
|
$
|
12,760,603
|
|
Net sales (decrease) increase %
|
|
(7.5
|
)%
|
|
2.7
|
%
|
|
2.2
|
%
|
|
2.0
|
%
|
||||
Gross profit
|
|
$
|
2,206,711
|
|
|
$
|
2,662,823
|
|
|
$
|
4,148,970
|
|
|
$
|
4,309,158
|
|
Gross profit as % of net sales
|
|
33.0
|
%
|
|
36.8
|
%
|
|
31.8
|
%
|
|
33.8
|
%
|
||||
Selling, general and administrative expenses
|
|
$
|
1,987,391
|
|
|
$
|
1,989,114
|
|
|
$
|
3,763,162
|
|
|
$
|
3,754,860
|
|
Selling, general and administrative expenses as % of net sales
|
|
29.7
|
%
|
|
27.5
|
%
|
|
28.9
|
%
|
|
29.4
|
%
|
||||
Unauthorized transaction related (recoveries) costs,
net |
|
$
|
(3,404
|
)
|
|
$
|
37,475
|
|
|
$
|
34,096
|
|
|
$
|
74,950
|
|
Interest expense
|
|
$
|
118
|
|
|
$
|
757
|
|
|
$
|
964
|
|
|
$
|
6,075
|
|
Income before income tax provision
|
|
$
|
222,606
|
|
|
$
|
635,477
|
|
|
$
|
350,748
|
|
|
$
|
473,273
|
|
Income before income tax as % of net sales
|
|
3.3
|
%
|
|
8.8
|
%
|
|
2.7
|
%
|
|
3.7
|
%
|
||||
Income tax provision
|
|
$
|
82,494
|
|
|
$
|
248,845
|
|
|
$
|
126,425
|
|
|
$
|
187,445
|
|
Income tax provision as % of income before income tax
|
|
37.1
|
%
|
|
39.2
|
%
|
|
36.0
|
%
|
|
39.6
|
%
|
Total cash provided by (used in):
|
|
2016
|
|
2015
|
||||
Operating activities
|
|
$
|
539,666
|
|
|
$
|
1,520,188
|
|
Investing activities
|
|
(467,150
|
)
|
|
(389,043
|
)
|
||
Financing activities
|
|
—
|
|
|
—
|
|
||
Net increase in cash and cash equivalents
|
|
$
|
72,516
|
|
|
$
|
1,131,145
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period (2016)
|
|
Total # of
Shares
Purchased
|
|
Average
Price Paid
per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plan (1)
|
|
Approximate Dollar Value of Shares Available under Repurchase Plan
|
||||||
October 1 - December 31
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
2,139,753
|
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
KOSS CORPORATION
|
|
|
|
|
|
|
|
|
/s/ Michael J. Koss
|
|
January 26, 2017
|
Michael J. Koss
|
|
|
Chairman
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
/s/ David D. Smith
|
|
January 26, 2017
|
David D. Smith
|
|
|
Executive Vice President
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial and Principal Accounting Officer)
|
|
|
Secretary
|
|
Exhibit No.
|
Exhibit Description
|
|
|
10.14
|
Amendment No. 6 dated October 31, 2016 to Credit Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. **
|
|
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer *
|
|
|
31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer *
|
|
|
32.1
|
Section 1350 Certification of Chief Executive Officer **
|
|
|
32.2
|
Section 1350 Certification of Chief Financial Officer **
|
|
|
101
|
The following financial information from Koss Corporation's Quarterly Report on Form 10-Q for the quarter ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Income (Unaudited) for the three and six months ended December 31, 2016 and 2015, (ii) Condensed Consolidated Balance Sheets as of December 31, 2016 (Unaudited) and June 30, 2016 (iii) Condensed Consolidated Statements of Cash Flows (Unaudited) for the three and six months ended December 31, 2016 and 2015 and (iv) the Notes to Condensed Consolidated Financial Statements (Unaudited). *
|
*
|
Filed herewith
|
**
|
Furnished herewith
|
1 Year Koss Chart |
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